Opinion
Civil Action No. 00-2730
July 24, 2002
MEMORANDUM AND ORDER
Presently before this Court are a Motion to Dismiss for Failure to Comply With an Order of Court (Document No. 14) filed by Defendants ACE INA Holdings, Inc., Insurance Company of North America, Brandywine Holdings, and Century Indenmity ("Defendants") on March 8, 2002, and Plaintiffs' Response and Cross-Motion for Enforcement of the Court's June 8, 2001 Order to Stay Proceedings and Compel Arbitration (Document No. 16) filed by Plaintiffs Alberta Byrd Brennan, Ethyl L. Wyche, Sharon D. Moore, Robin Bridges Johnson, Brenda Graves, Naomi L. Moment, and Deborah Reid ("Plaintiffs") on April 22, 2002. For the reasons set forth below, upon consideration of the Defendants' Motion, Plaintiffs' Response and Cross-Motion, and Defendants' Reply and Opposition (Document No. 17), this Court denies Defendants' Motion to Dismiss and grants Plaintiffs' Cross-Motion for Enforcement in the above-captioned action.
BACKGROUND
Plaintiffs filed an original complaint on May 30, 2000 asserting a cause of action against their employers for race discrimination in violation of several state and federal statutes. Plaintiffs amended the complaint on September 7, 2000 to assert a class action against the defendants. On September 13, 2000, Defendants moved for a stay of judicial proceedings and requested that the court compel arbitration based on the Federal Arbitration Act ("FAA"), 9 U.S.C. § 1. On June 8, 2001, this Court granted Defendants' motion and compelled arbitration pursuant to the FAA. 2001 U.S. Dist. LEXIS 9453 (E.D.Pa. June 8, 2001). In its Memorandum and Order, this Court found that the parties entered into a valid arbitration agreement and that their dispute fell within the scope of the agreement. Byrd Brennan v. ACE INA Holdings Inc., 2001 U.S. Dist. LEXIS 9453.
On July 6, 2001, counsel for Plaintiffs submitted to Defendants a written demand for arbitration on behalf of a class comprised of the named plaintiffs and all present and former black employees of the defendants. Counsel for Defendants responded by letter, asserting that Plaintiffs' demand for arbitration as a class did not conform to the applicable arbitration rules and procedures as found in the defendants' Employment Dispute Arbitration Policy, which is silent on the issue of class arbitration. Plaintiffs' counsel in turn responded that the issue of class certification was one for the arbitrator to decide. Despite voluminous correspondences between counsel, the parties were unable to resolve this dispute themselves. The final correspondence came on August 30, 2001, when Defendants' counsel wrote to Plaintiffs' counsel, "I have attempted twice to reach you by telephone . . . Please call me if you wish to discuss issues related to the arbitration demands of your clients." Def's Mot. Dismiss Ex. 7 (Mar. 8, 2002). Plaintiffs' counsel never responded and Defendants filed the instant motion six months later.
LEGAL STANDARD
Rule 41(b) of the Federal Rules of Civil Procedure allows a court to dismiss an action "Thor failure of the plaintiff to prosecute or to comply with these rules or any order of court." "[D]ismissal is a drastic sanction and should be reserved for those cases where there is a clear record of delay or contumacious conduct by the plaintiff." Donnelly v. Johns-Manville Sales Corp., 677 F.2d 339, 342 (3d Cir. 1982). The threshold question to determining whether dismissal is appropriate is whether there has been a failure on the part of the plaintiff to prosecute or comply with an order of the court. Fed.R.Civ.P. 41(b)(2000).
DISCUSSION
Defendants assert that, under the FAA, a district court must order that arbitration shall proceed according to the terms of the parties' arbitration agreement, and since the agreements in question here do not provide for class representation, the Court's June 8, 2001 Order to Compel Arbitration does not permit Plaintiffs to proceed as a class. Furthermore, they argue that it is inappropriate for a federal court to compel class arbitration when the parties' arbitration agreement does not provide for it. Finally, Defendants argue that because Plaintiffs insist on proceeding as a class, they have failed to comply with this Court's Order and their case should be dismissed pursuant to Rule 41(b) for "failure of the plaintiff to prosecute or to comply with . . . any order of court." Plaintiffs respond that they complied with the Order when they submitted their demand for arbitration. Further, they argue that Defendants' arbitration procedures provide that "the arbitrator will have all of the powers a judge would have in dealing with any question or dispute that may arise before, during, and after the arbitration hearing," and that therefore it is within the arbitrator's discretion whether to allow class arbitration. In addition, Plaintiffs have filed a Cross-Motion for Enforcement of this Court's previous Order to compel Defendants to proceed with arbitration. The Court will address the parties' arguments in the order that they were presented.
A. Defendants' Motion to Dismiss
When a party is aggrieved by the failure or refusal of another to arbitrate under a written agreement for arbitration, § 4 of the FAA permits that party to petition a United States District Court for "an order directing that such arbitration proceed in the manner provided for in such agreement." 9 U.S.C. § 4. In deciding whether to order arbitration, the district court's role is limited to determining (1) whether an arbitration clause is valid and enforceable; and (2) whether the specific dispute falls within the scope of the agreement. Smith v. The Equitable, 27 F. Supp.2d 565 (E.D.Pa. 1998), appeal dismissed, 209 F.3d 268 (3d Cir. 2000). Any remaining questions regarding interpretation of the terms of the arbitration agreement are to be answered by the arbitrator. Great Western Mortgage Corp. v. Peacock, 110 F.3d 222, 230 (3d Cir. 1997) ("Once a dispute is determined to be validly arbitrable, all other issues are to be decided at arbitration. Since the purpose of the FAA is to ensure that agreements to arbitrate are enforced, a court compelling arbitration should preserve the remaining disputed issues for the arbitrator to decide.").
This Court expressly addressed the two relevant inquiries in its June 8, 2001 Order. The Court found that "[e]ach plaintiff signed a version of the arbitration agreement and the arbitration agreement covers in scope the dispute in question. The arbitration agreement sufficiently covers all of the federal and state statutes which plaintiffs allege Defendants have violated. Thus, it is proper for this Court to order arbitration." Byrd Brennan, 2001 U.S. Dist. LEXIS 9453 at **4-5 On July 6, 2001, Plaintiffs complied with that Order when they submitted to Defendants their demand for arbitration.
Defendants argue that, because the arbitration agreements in question do not specifically provide for it, class arbitration is contrary to "the manner provided for in such agreement[s]," 9 U.S.C. § 4, and therefore it is improper for this Court to order the plaintiffs to proceed as a class. Defendants accordingly interpret the June 8, 2001 Order as precluding class arbitration and argue that Plaintiffs' insistence on proceeding as a class amounts to a failure to comply with that Order. Alternatively, Defendants maintain that when an arbitration agreement is silent on the issue, class arbitration is improper. The Court finds that the defendants have misconstrued the terms of its arbitration rules and procedures, and as a result they have also misinterpreted the Court's June 8, 2001 Order.
The June 8, 2001 Order was silent on the issue of class arbitration, properly leaving all remaining questions of interpretation for the arbitrator to decide. One of those remaining questions is whether Plaintiffs may proceed as a class. Although Defendants are correct that the relevant arbitration procedures do not specifically mention class arbitration, the agreements do provide in part that "[t]he arbitrator will have all the powers a judge would have in dealing with any question or dispute that may arise before, during, and after the arbitration hearing." CIGNA Property Casualty Division Employment Dispute Arbitration Rules and Procedures 12, ¶ 8. If Plaintiffs were allowed to pursue their claims in district court, they would be permitted to submit to the court the question of class certification. Under the explicit terms of the arbitration agreement, it follows that if the issue could be submitted to a district judge then it can be submitted to the arbitrator.
The Third Circuit has not addressed whether, as Defendants contend, class arbitration is improper unless the arbitration agreement specifically provides for it. In support of this position, Defendants rely on a Seventh Circuit decision that held it improper for a district court to order class arbitration when the agreement was silent on the issue. Champ v. Siegel Trading Company, Inc., 55 F.3d 269, 275 (7th Cir. 1995). The Champ case is distinguishable from the case at bar, however, since neither the June 8, 2001 Order nor today's ruling order the parties to proceed as a class. Like the agreement in Champ, the parties' agreement in the instant case is silent on the issue of class arbitration and this Court will not read into the agreement a term that the parties did not bargain for. Instead, the Court will "enforce the parties' arbitration as they wrote it," Champ, 55 F.3d at 275, and leave all issues of interpretation for the arbitrator.
In Johnson v. West Suburban Bank, 225 F.3d 366, 377 n. 4 (3d Cir. 2000), a borrower brought a putative class action lawsuit against his lender under the Truth in Lending Act and Electronic Fund Transfer Act. The district court denied lender's motion to compel arbitration under the loan agreement, finding that the statutes in question reflect a Congressional intent to encourage class actions and that compelling arbitration would conflict with that intent. The Third Circuit Court of Appeals reversed, finding that neither statute explicitly precludes arbitration. Johnson is not applicable to the instant matter because the court expressly left open the question of whether the arbitration could proceed as a class action. The Johnson court noted, "[t]his court has never addressed the question whether class actions can be pursued in arbitral forums, though it appears impossible to do so unless the arbitration agreement contemplates such a procedure." Id. at 377 n. 4 (citing Champ v. Siegel Trading Company Inc., 55 F.3d 269, 274-275 (7th Cir. 1995).
In Champ, the district court granted Plaintiffs motion requesting that the court certify her as a class representative in the arbitration proceedings. The district court then reconsidered and revoked its order, holding that it lacked authority to certify a class arbitration where the parties had not agreed to such a procedure in their arbitration agreement. The Seventh Circuit affirmed, analogizing arbitration agreements to other contracts negotiated between private parties, and finding that
a district court's chief concern under the FAA is to enforce the parties' arbitration as they wrote it. . . . The parties' arbitration agreement makes no mention of class arbitration. For a federal court to read such a term into the parties' agreement would disrupt the negotiated risk/benefit allocation and direct the parties to proceed with a different sort of arbitration. . . . [S]ection 4 of the FAA forbids federal judges from ordering class arbitration where the parties' arbitration agreement is silent on the matter.
Champ, 55 F.3d at 275.
B. Plaintiffs' Cross-Motion for Enforcement
Plaintiffs request that this Court enforce its June 8, 2001 Order and compel Defendants to proceed to arbitration. Defendants, in arguing that Plaintiffs failed to comply with the Order, cite an Oregon Appellate Court case that affirmed the trial court's dismissal of Plaintiffs case four months after ordering arbitration because Plaintiff had failed to proceed to arbitration during that time. Hilsenbeck v. Quadrant Corp., 632 P.2d 19, 23 (Or.App. 1981). The Court found that Plaintiffs inaction and its contention that the dispute was not arbitrable indicated that Plaintiff did not intend to proceed to arbitration and that the trial court should not have to carry the case on its docket interminably while Plaintiff decided whether to proceed. Id.
Here, Plaintiffs clearly intend to proceed with arbitration, having filed their demand for arbitration less than one month after the Order. The dispute that has prevented the resolution of this matter has been over the process by which the parties desire to proceed. and not over the substance of Plaintiffs' claims or Plaintiffs' willingness to proceed to arbitration. The parties should resolve their disagreement over class arbitration in front of the arbitrator in accordance with this Court's previous Order with all appropriate speed so as to avoid further delays.
CONCLUSION
The Court denies Defendants' Motion to Dismiss, and grants Plaintiffs' Cross-Motion for Enforcement of this Court's June 8, 2001 Order Compelling Arbitration. The issue of whether Plaintiffs may proceed as a class is left for the arbitrator to decide. Defendants are hereby ordered to process Plaintiffs' demand for arbitration within 60 days. An appropriate Order follows.
ORDER
AND NOW, this 24th day of July, 2002, upon consideration of Defendants' Motion to Dismiss for Failure to Comply With an Order of Court (Document No. 14), Plaintiffs' Opposition thereto and Cross-Motion for Enforcement of the Court's June 8, 2001 Order to Stay Proceedings and Compel Arbitration (Document No. 16), and Defendants' Reply and Opposition to Plaintiffs' Cross-Motion (Document No. 17)
IT IS HEREBY ORDERED and DECREED that the Motion to Dismiss is DENIED and the Cross-Motion for Enforcement is GRANTED.
IT IS FURTHER ORDERED and DECREED that the parties shall proceed to the proper arbitration forum as required by the underlying arbitration agreements within sixty (60) days of this Order or suffer sanctions upon application to the Court. The validity of class arbitration in the above-captioned matter shall be determined by the duly appointed arbitrator.